The IMF is more than just a bank, holding a powerful international monitoring role and dishing out ‘expert’ advice.
The IMF and World Bank were among the ‘Bretton Woods’ institutions set up at the end of the Second World War as part of efforts to rebuild the international economic system.
The Fund was primarily set up to ensure stability in the international monetary and financial system. It was created with a remit to prevent crises, to react to economic shocks when they occur, and to alleviate poverty by encouraging growth.
New report on the IMF
Health Poverty Action is a member of Action for Global Health and we have produced a new report looking at the impact of the IMF and its policies on poor countries’ ability to recruit health workers. Download it here:
The IMF, the Global Crisis and Human Resources for Health (1.01 MB)
Three roles
The IMF has three roles – lending money in crises, monitoring how countries are doing, and providing technical assistance.
As a lender, the IMF provides loans to member countries struggling with ‘balance of payments’ problems – when a country is spending more foreign currency on its imports than it is making from its exports.
The rationale is to help countries increase their exports so they can balance their books, repay old loans and become creditworthy for fresh investment. During economic crises the IMF acts as a lender of last resort. To counter the global economic crisis the IMF budget was temporarily tripled in 2009.
The IMF also has a powerful surveillance role. This allows it to declare whether or not a country is creditworthy. Other international creditors use the IMF’s ratings to decide whether they should agree to debt cancellation, or provide new grants or loans.
Its third role is to provide technical assistance to its member countries. Such technical assistance has often been criticised for promoting a one-size-fits-all approach of spending cuts and harsh economic reforms.
How is it run?
The governance of the IMF has also been widely criticised. Like the World Bank, the voting rights of each member country, and therefore decision-making power, are determined by how much money each country has been able to add to the IMF’s coffers. The world’s 50 poorest countries have less than 3% of the vote at the International Monetary Fund (IMF).
Historically the IMF’s managing director has been European and the president of the World Bank has been from the United States. Day to day the IMF is run from its HQ in Washington with over 2,500 staff around the world.
Support for reforms has been steadily growing but progress is slow. Until there is radical reform, poor countries cannot effectively challenge policies that directly affect the lives of their people.
How does the IMF impact on healthcare in the developing world?
In return for IMF help, borrower countries must swallow a package of economic reforms – reforms that can affect people’s access to healthcare. IMF loans are disbursed in installments, and if reforms are not put in place, the flow of aid and loans may be halted.
Not only that, but other sources of credit may dry up because other international creditors use the IMF’s ratings to judge how risky it might be to invest in or lend to a country.
For most developing countries the World Bank and IMF support is set out in Poverty Reduction Strategy Papers (PRSP). These papers are, at least in theory, written by a government in consultation with its civil society and its external development partners, detailing how the government’s policies will promote economic growth.
Last modified: 12/01/2011
